Monday, February 26, 2007
An article on Bloomberg by John Wasik is the latest to pick on some of the newer and narrower ETFs.
There are some points made that seem to recur on financial websites over and over that I believe miss the mark and this article is no exception.
Right out of the blocks Mr. Wasik draws a parallel with increased ETF issuance today and dot com IPO mania from the Internet days.
The Internet bubble produced countless $50 billion, $100 billion and larger companies. The article picks on the HealthShares ETFs (don't most articles pick on these funds?) as being emblematic of this effect but at this point I would be shocked if the entire HealthShares line even had $100 million in assets (I have a call into HealthShares to find out).
In picking on HealthShares the article asks if you really want to invest in endocrine disorders, climate changes or US livestock futures among others. This line of questioning misses the point. Most investors will not need these funds which has nothing to do with whether they should exist or not. The market will decide whether these funds make it not someone's arbitrary concept of what we need.
The regard for do-it-yourselfers is noble but people who view the market as a casino will always find something to bet on, if not ETFs then something else; this is a fairly obvious point. And for investors that really don't know any better a the narrower you get with an investment the more risk you take.
Personally I don't have an interest in most of the new products that come but I owe it to my clients to at least give them a quick once over because some of them are better mousetraps.
On a personal note I have wanted to use a picture of Skeletor for ages; we may see more of him on future posts.